Correlation Between American Homes and Deutsche Post

Can any of the company-specific risk be diversified away by investing in both American Homes and Deutsche Post at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Homes and Deutsche Post into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Homes 4 and Deutsche Post AG, you can compare the effects of market volatilities on American Homes and Deutsche Post and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Homes with a short position of Deutsche Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Deutsche Post.

Diversification Opportunities for American Homes and Deutsche Post

-0.52

Correlation Coefficient

American Homes  Deutsche Post

Excellent diversification

The 3 months correlation between American and Deutsche is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Deutsche Post AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Post AG and American Homes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Homes 4 are associated (or correlated) with Deutsche Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Post AG has no effect on the direction of American Homes i.e., American Homes and Deutsche Post go up and down completely randomly.

Pair Corralation between American Homes and Deutsche Post

Assuming the 90 days trading horizon American Homes 4 is expected to under-perform the Deutsche Post. But the stock apears to be less risky and, when comparing its historical volatility, American Homes 4 is 1.11 times less risky than Deutsche Post. The stock trades about -0.02 of its potential returns per unit of risk. The Deutsche Post AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,359  in Deutsche Post AG on December 23, 2024 and sell it today you would earn a total of  741.00  from holding Deutsche Post AG or generate 22.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

American Homes 4  vs.  Deutsche Post AG

American Homes 4

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Homes 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Homes is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Deutsche Post AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Post AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Deutsche Post unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Homes and Deutsche Post

The main advantage of trading using opposite American Homes and Deutsche Post positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Deutsche Post can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Deutsche Post will offset losses from the drop in Deutsche Post's long position.

The idea behind American Homes 4 and Deutsche Post AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.